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We study equity price reactions to compensation contracting in experimental markets. Motivated by research reporting positive price reactions to adoption of performance-based compensation plans for executive managers, but postulating competing reasons as to why, we design an experiment that...
Persistent link: https://www.econbiz.de/10013036078
We study equity price reactions to compensation contracting in experimental markets. Motivated by research reporting positive price reactions to adoption of performance-based compensation plans for executive managers, but postulating competing reasons as to why, we design an experiment that...
Persistent link: https://www.econbiz.de/10013036841
Traditionally, researchers have had difficulty testing the relationship between the degree of risk or uncertainty in workers' environments and incentive pay. The authors employ Prendergast's (2002) theory that incorporates the delegation of worker authority into the principal-agent model to...
Persistent link: https://www.econbiz.de/10013137206
This article explores a dynamic moral hazard setting in which a principal hires a team of agents for a project. As the project generates revenue upon completion, the principal incentivizes agents' efforts by designing bonuses for success. If bonuses are provided through spot or...
Persistent link: https://www.econbiz.de/10014353011
Young professionals typically do not enter into life-long employment relations with a single firm. Therefore, future employers can learn about individuals' abilities from the observable facts regarding earlier work relations. We show that these informational spill-overs have profound...
Persistent link: https://www.econbiz.de/10003275078
Young professionals typically do not enter into life-long employment relations with a single firm. Therefore, future employers can learn about individuals' abilities from the observable facts regarding earlier work relations. We show that these informational spill-overs have profound...
Persistent link: https://www.econbiz.de/10013318139
A basic tenet of incentive theory states that there is a trade-off between risk and incentives. By implication, greater variation in firm profits leads to a reduction in the use of profit sharing. Surprisingly, there is little empirical evidence for this relationship. This paper reexamines the...
Persistent link: https://www.econbiz.de/10014088114
Using data that includes specific contractual details of Relative Performance Evaluation (RPE) contracts granted to executives for 1,833 firms for the period 1998 to 2012, we develop new methods to characterize RPE awards and measure their value and incentive properties. The frequency in the use...
Persistent link: https://www.econbiz.de/10013059189
Baker (2002) has demonstrated theoretically that the quality of performance measures used in compensation contracts hinges on two characteristics: noise and distortion. These criteria, though, will only be useful in practice as long as the noise and distortion of a performance measure can be...
Persistent link: https://www.econbiz.de/10011376645
We explore the relation between task complexity, delegation, and incentive compensation. Conventional agency theory posits that task complexity increases the noise in performance measures and is hence associated with lower incentive compensation. However, Prendergast (2002) argues that task...
Persistent link: https://www.econbiz.de/10014063317